Internet financial firms

The potential for geeky financial firms is featured in an article in last week’s The Economist.  At this time the firms are small compared to the banks but there is probably enough potential that the banks could be threatened.

This could be both good and bad.

It will be good if there develops and alternative to fractional reserve banking.  I am thoroughly convinced that money creation by fractional reserve debt is a Ponzi scheme which frequently collapses in a financial crisis.  If these firms do replace the banks and avoid fractional reserves  we will have to find another way of creating money.  Whatever it is it will require that the money supply be flexible up and down to correspond with the level of economic activity.  I rather like the concept of Local Exchange Trading Systems which could be expanded to a national level.

The not so good feature of geeky financial services is that they would be an ideal new venture for large firms such as Amazon, Facebook or Google, firms whose commitment to privacy appears to be limited to their own.

buttom2I can see two groups rubbing their hands at the prospect of one of these large firms becoming  involved in most financial transactions.

The first are those in the online advertising business who use information about people to target advertising and the second are government spooks and those in government who believe they know what is best for the rest of us and want to control our lives.  Just think: emails, friends, shopping and financial data on everyone all available from one source. I wonder if the spies already have access to personal  financial data.

Probably the people into social control are the most threatening.  Once the monitoring  systems are all in place it will be easy for somebody to misuse them.

Another article this week, from Forbes,  talks about small groups of people getting together to provide each other with financial support.  This sounds like the early  credit unions on the Canadian prairies where a lot of transactions took place on someones kitchen table.

Intelligent machines, neurological disorders and decision making

It is tempting to say computers with artificial intelligence will never replace humans with all their neurological disorders but after reading this article in The Economist a couple of weeks ago, one needs to be careful.  It could be wishful thinking.

For me this raises the issues of how we use agricultural surpluses and what impact smart computers will have on decision-making..  How do we use the human energy and time released by technology?

When I studied European economic history the professor spent a lot of time talking about medieval improvements in agricultural productivity.  In medieval times there were three classes of people – those who prayed, those who fought and those who worked to support the first two.  The more productive agriculture became the more people could pray or fight as most of the agriculture surplus went to monks and knights.

This professor went on to write a book about the industrial Revolution in which he pointed out the plague reduced the supply of workers who were then able to claim a better standard of living and keep it.  (This made it efficient to replaced labor with coal which was very cheap in England.)

For most of human history those who prayed and those who fought were able to claim for themselves the surplus.  Since the Industrial Revolution the increased production and the supply and demand for labor have been such that  workers have been able to claim a share of the agricultural surplus and industrial production.  To the fighters and the prayers have been added those who manage.  We also have the work ethic and a religious like belief that the only way to share the surplus to have everyone working regardless of how useless and meaningless the work is.

With the development of machines that can make decisions  and with problems in the resource base the demand for labor is going down quickly and lots of people around the world are unemployed.  I fear we are returning to what has been the norm for several millenia – a few people will live in luxury and the rest will survive at a subsistence level.

computer_rageThis post started with an article about smart machines.  I figure that most, if not all of us, have a neurological disorder in that our brains are wired differently.  We behave differently, develop different values and make different decisions. How will this impact on machines that make decisions?  How will our society be changed if decision-making is by computers that do not have disorders?   Will different machines be able to make different decisions from the same inputs or will all machines make decisions according to the values of the people who programmed them?

However intelligent computers develop I enjoy the reading and thinking that goes into this weblog.  I hope I don’t lose that.

%d bloggers like this: